Form F stock transfer

[THYAGARAJAN KALYANASUNDARAM]

Dear experts,

one of my customer sending their equipment from one state to another state and they have registered in both the state. For which they are issuing form f from one state to another state. Whereas the authority concern is asking us to pay the tax on misuse of issuance of form f due to no sale effected in the received branch. Our contention is once the job gets over we will transfer the equipment to respective transferror state. Whereas our client is liable to pay only service tax on the proving of services to various clients. There is no transfer of property involved in the transaction, possession n control with our client only. Can any one can help how to defend this issue.

[Ganeshan Kalyani]

Sir, your last sentence in your query is clear. Do you mean to say that after receiving the equipment from your own branch on stock transfer basis you subsequently give it to your customer from whom you charge service tax.

[SURESH ASTEKAR]

Dear Thyagarajan Kalyanasundaram,

From your query I understand that the authority is seeking to demand CST on the interstate movement of equipment on the ground that equipment transferred to the other State/s has not been sold in the State to which they have been transferred. The understanding of the authority is totally wrong. Section 6A of the CST Act does not contemplate that the goods stock-transferred to one's own branch or to an agent shall be sold in the State to which they have been transferred. All that Section 6A of the CST Act requires a dealer to show is that the interstate movement of the goods was "occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale". In other words, if goods move from one State to another other than by way of sale, there will be no CST on such movement if declaration in Form "F" is furnished. Further, a look at declaration "F" also makes it clear that the declaration is merely to the effect that the goods transferred have been received and duly accounted for by the branch/agent who has received the goods. In fact there was Circular issued by Maharashtra VAT authorities that Form F is to be provided to dealers who undertake jobwork and send back the goods to the person who had sent the goods for job work. Therefore, the authority cannot demand CST on the ground that the goods sent to other State have not been sold in such other State.

[Ganeshan Kalyani]

Sir, there is no sale happened in your case. So, no tax is warranted. In CST there is no condition provided as to the goods transferred should compulsory be sold in the receiving State. Hence you are in correct way. You must convince the Authority accordingly. Thanks.

[THYAGARAJAN KALYANASUNDARAM]

Thanks for your valuable answer and support.

AI Summary

Interstate stock transfer exemption: Form F supports non-sale characterization so CST is not leviable on such movements. Interstate movement of equipment between branches for jobwork qualifies as a stock transfer and not a sale where possession and control remain with the transferor; furnishing Form F that the receiving branch has received and accounted for the goods supports non-sale characterization. Section 6A requires that movement be occasioned by transfer to another place of business or agent and not by sale, so authorities cannot levy central sales tax on such transfers when Form F is produced and services are subject to service tax.